In this guide I’ll cover:
- Tax software you can use that is free or cheap
- The most common tax slips you’ll need to deal with
- Examples of how they work
- And more!
So if this year is finally the year you do your taxes yourself for the first time, you’ll love this guide. It’ll also be useful if you want to follow along and understand what is happening when your accountant does their magic—but if I do my job right, and you’re employed full-time, you’ll realize filing your taxes online is actually downright easy.
Before we start, a small pep talk: you can totally do this. This guide is perfect for Canadians who are full-time employed, don’t have investments that live outside of an RRSP or a TFSA, and don’t run their own business. That’s a lot of people. But it’s not everyone, and of course, if you have a complex tax situation, an accountant will make your life a lot easier. And if you side hustle and want to do that part of your taxes yourself, this guide from Holy Potato is still my absolute go-to.
Free and cheap tax software in Canada
First things first: the only reason that it is easy or possible for beginners like you and me to file our taxes online in Canada is because of software. Sure, you could file a paper tax return, but you don’t have to. That’s a great thing.
Personally, I highly recommend Simpletax because it is fully-featured, pay-what-you-want software—which includes $0. They don’t restrict any of their features behind a paywall unlike many of the popular options on the market, and for the purposes of this tutorial, you can go in and prepare a trial tax return as far as you want, including filing it, without paying anything. It’s the perfect way to test the waters and learn more.
There are other options that offer free tiers, like UFile, TurboTax, and StudioTax. However, just note that UFile and TurboTax limit who can use it or what features are included in their free tier, so it’s not as easy to test them out and get the full experience without committing. Also, here are some great articles to read about TurboTax if you’re considering using them.
For those reasons, I’ll be showing you how to do things with Simpletax in this post, and in the video above. (Also, disclaimer: I am personally in my seventh year as a Simpletax user, so it’s the software I know best.)
Setting up your online tax return
When you start your tax return online, you’ll be asked to enter some a lot of personal details. For that reason, when you’re setting up an account with any tax service, make sure to follow the best practices for online security: generate a secure password using a password manager like LastPass, and enable two-factor authentication right away.
You’ll be glad you did when you can safely enter information like your home address and your SIN number, both of which you’ll need as you start your tax return.
Sidebar: If you want to make life easier for both current-you and future-you, signing up for MyAccount with the CRA is an amazing idea. It lets you do stuff like get your tax return direct-deposited into your bank account, and find important details about your taxes online for the next time you file.
Entering your tax slips into your return
Once you’ve got your personal questions answered, it’s time to add in your actual tax details. This is the information that gets mailed to you (or emailed to you) by people like your employer, your investment service, your bank, and so forth.
Sometimes your tax information will have an identifiable name, like a T4, which is a tax slip you get from your employer to report your income (if you’re employed by a company, that is). Other times, you’ll be more familiar with what it represents than with the name of the slip itself (like “bank interest”).
Simpletax can help with both. When you first start inputting your tax credits, you can either search for what you need, or answer some questions to help understand what you need to input on your return.
When you click into the search box, some commonly-used options pop up to get you started.
And if you prefer to go through the Answer a few questions flow, you’ll get to check things off plain-language lists like this one.
In all of my simple tax filing years, I read these questions and was reassured that I really didn’t have too much to enter, since most of the things didn’t apply to me—and the ones that did, like student loan interest and charitable contributions, were straightforward to enter.
When you get to entering a tax form, like your T4, it’s just a matter of matching the boxes on the tax slips you’ve been mailed, and the boxes in your return. Here’s a blank T4, where you can see that each blank space has a number beside it, like 14 and 22 on the first line.
Your T4 will have numbers in the blank boxes beside those. As an example, 14 is your total employment income for the year, so if your salary was $50,000, you’ll see $50,000 in that box (plus any additional taxable benefits from your employer).
You’d enter that number—let’s say it’s $50,000—into the box marked 14 in the T4 section of your online tax return.
You’d keep entering the other boxes based on the numbers that are on your T4 until you’ve filled them all in. The same process applies to any tax slip that might, at first glance, look like mumbo-jumbo of a bunch of numbers. One of the numbers will be the identifier of the field, and to report it on your return, you just input the right amount in the right field based on the slips you’ve been sent.
Bonus: You can autocomplete many of these forms your return using Auto-fill. If you have an online account with the CRA (you should, it’s deeply helpful) you can automatically fill in anything on this list of tax documents with a blue star beside it. So if you only need to claim those things, Simpletax has you set up to pull it all in from the CRA in seconds.
Enter and optimize your credits and deductions
There’s a bit more to filing your tax return than just entering your tax slips. You’ll also need to enter information about spending or investing you did that might earn you tax benefits.
Here’s a primer on tax credits and deductions if you need one, because they differ a bit, but for now let’s focus on what it looks like to enter them, and what you’ll need.
One popular tax credit is charitable donations. If you donated to a charity last year and got a tax receipt, this is what you’ll need to enter to claim it on your return.
Pretty simple, right? You’ll find similar entry types for your RRSP contributions, medical expenses, and other entries that aren’t earned income but still impact your tax situation.
The most important thing to remember is that you absolutely, positively need a receipt in order to claim anything on your taxes — and you need to keep it for a long time. Specifically, you’re responsible for keeping your tax records (including receipts) for 6 years.
Filing your tax return online
Finally, once you’ve entered everything, you can review and file your tax return to the CRA directly from almost every tax software, including Simpletax.
Reviewing is simple. You can click on “Check and Optimize” to have Simpletax look over your return for things you might have missed, or suggestions they have for optimizing your tax situation.
Then, once you’re ready and you’ve fixed any errors (they’ll catch those too) you can see a summary of your prepared return, and even download the exact files that Simpletax prepared in all of their government-y glory. This is a great step if you’re trying to check your work against documents prepared by someone else on your behalf in order to learn.
Last but not least, you can submit your return after you’ve cleared any outstanding errors. It’s literally this easy.
If you’re set up with a CRA account you can get any refund owed to you by direct deposit, and you’ll be able to see your notice of assessment online as well once it’s available.
And that’s that. You’ve officially filed your taxes online in Canada for the first time, and you have earned multiple high fives — even if you just walked through the process to learn, and didn’t fully do it yourself.